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Overnight U.S. Stock News
June S&Ps this morning are trading +2.30 points on the strong weekend retail sales report from Wal-Mart and general optimism about Q1 earnings. The Dow and S&P 500 last Friday closed narrowly mixed (Dow -0.14%, S&P 500 +0.07%), while the Nasdaq took a -0.95% hit due to Microsoft's very negative earnings report late last Thursday. The stock market continues to be supported by positive earnings news and by Mr. Bernanke's dovish comments last Thursday, although high crude oil prices are still acting like a wet blanket on the market.

The Nikkei index today closed slightly higher by +0.12%. The European stock markets are closed today for the May Day holiday.

Companies schedule to release Q1 earnings before today's open include Sysco, Tyson Foods, Humana, and Public Service Enteprise Group. Companies reporting after today's close include Principal Financial Group, Fisher Scientific, and Chesapeake Energy.

Humana (HUM) could show strength this morning after reporting Q1 earnings of 50 cents a share, which was better than the consensus of 43 cents, though on the lower end of the company's guidance released on February 6 of 50-55 cents. In addition, Humana increased its guidance for full-year 2006 earnings to $2.82-2.88 a share. However, Q1 net income of $83.7 million was down from $106.7 million a year earlier as the company boosted expenses in order to gain market share in selling the Medicare prescription insurance plans.

Boeing is in advanced discussions to buy Aviall Inc, an aviation parts and service distributor, for about $1.7 billion, according to a story in the WSJ this morning citing unnamed sources close to the transaction.

Dynegy (DYN) may show weakness this morning after reporting that it will restate last year's earnings because of a $13 million increase in net deferred tax liability, which will reduce its 2005 net income to $90 million from the originally reported $103 million.

Nortel Networks (NT) reported late Friday that it registered a fiscal Q4 loss of $2.3 billion loss (-53 cents a share) because of $2.47 billion in legal expenses. However, on a more postive note, fiscal Q4 sales rose sharply by 16% to $3.0 billion from $2.51 billion a year earlier.

Xerox (XRX) may get a boost today after some favorable weekend press in Barron's, which quoted James Benson, a partner at Harris Associates, as predicting that Xerox's stock price may rally 45% due to increased demand for color printing.

Krispy Kreme Doughnuts (KKD) could show some strength today after the company met the NYSE's deadline to file its fiscal 2005 10-K annual report by April 31 or face delisting. However, Krispy Kreme reported a loss of $198.2 million or $2.55 a share due to legal costs and store closings, which was much larger than the year-earlier loss of $48.6 million or 80 cents a share.

Aztar Corp (AZR) may show strength this morning after the the owner of Tropicana casinos received another bid to buy the company, this one for $50 a share in cash (worth about $1.8 billion) from Columbia Sussex Corp.

West Pharmaceutical Services (WST) rallied 2% in after-hours trading last Friday after Jim Cramer on his "Mad Money" show recommended the stock because of his belief that demand is strong for the company's tamper-proof drug packaging and because the company is only followed by 3 analysts.

Today's U.S. Market Focus
Today's April core PCE deflator (the Fed's preferred inflation measure) is expected to show a slight increase to +1.9% y/y from March's 2-year low of +1.8% y/y, but that would still leave the series in favorable shape just below the 2.0% mark. The markets will continue to watch for any seepage from energy prices into core prices, which would be a particularly negative development that fortunately has not happened thus far.

Today’s April ISM manufacturing index is expected to show a slight decline of -0.2 to 55.0, adding to the -1.5 decline seen in March to 55.2. The expected report of 55.2 today would confirm the general market consensus that the US manufacturing sector should show decent and stable growth in coming months as consumer and business spending remains firm even in the face higher interest rates and crude oil prices.

June 10-year T-note prices this morning are trading +2.5 ticks on some continued upward momentum afer last Friday's 4.5 tick rally. T-note prices rallied mildly last Friday on the slightly weaker-than-expected Q1 GDP report of +4.8% and continued relief from Fed Chairman Bernanke's statement last Thursday that the Fed would be willing to pause in its tightening process even if the inflation risks were not balanced.

The dollar this morning is trading is trading mixed with the dollar/yen down by 0.60 yen and the euro down 0.17 cents. The dollar has plunged in the last 2 weeks due to the combination of the G7's call for stronger Asian currencies on April 21, the Chinese 27 bp rate hike on April 27, and the Fed's more dovish stance which will soon turn US interest rate differentials sideways.

June crude oil prices this morning trading +74 cents on continued concern about Iran. In addition, there was a car bombing near parked fuel tankers over the weekend by Nigerian rebels, although the blast did not cause any casualties. Crude oil prices rallied 91 cents last Friday due to Iran's defiance to last Friday's UN deadline for Iran to curb its nuclear activities.